Cash Crunch: RBI slips up again?

— By Editorial | Apr 19, 2018 07:30 am

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The currency crunch in parts of the country, with ATMs running empty in several places, underlines mismanagement by the central bank. Before undertaking a five-fold increase in the production of Rs 500 notes, currency managers ought to have anticipated the likelihood of disruption. Amidst reports of hoarding of Rs 2000 notes, ahead of the Karnataka and other Assembly elections this year, and the Lok Sabha election next year, provision of adequate currency ought to have been made before switching the security printing presses to the printing Rs 500 notes.

With the introduction of a new Rs 200 note and the replacement of the old fifty rupee notes with the new ones, the limited security printing presses of the RBI were already stressed. On top of it, a five-fold increase in the printing of Rs 500 notes seems to be the main cause of the currency crunch. Also, the fact that the currency in circulation now is higher than the level at the time of demonetisation on November 8, 2016, would suggest a certain degree of note-hoarding by the vested interests. Further adding to the crisis are all manner of rumours, including about a fresh bout of notebandi and that the banks do not re-issue the Rs2000 notes once deposited by people. The need is to reassure the people that enough currency is available on demand in any and all parts of the country.